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EURO Doom Mongering Persists

There is no backing down from ‘this’ persistent EUR decline. The market risk premium that was aggressively applied last week feels in danger of giving it all up and then some. Sentiment remains vulnerable allowing event risk to dominate on a disappointing of potential ‘under delivery’ at the Brussels Summit this weekend.

Overnight brought a host of further stress indicators to the fore. What’s bad for China is bad for Europe. Data revealed that Chinese growth figures fell short of expectations coupled with some disappointing earning from Euroland is again boosting market volatility. With Germany trying to manage market expectations, Moody’s is offering to do the same by putting France on a three-month notice. They have indicated that ‘pressure from debt metrics’ could leave the country with a negative credit outlook, even a downgrade, and this only months ahead of important elections.

Also getting traction this morning is Nouriel Roubini believing, pragmatically so, that the Eurozone requires the dollar to fall below $1 for a EU crisis solution and that the ECB needs to slash rates. None of these are new ideas, it’s perhaps the sensitivity of timing in such an important week for the vulnerable asset classes.

It goes to show how much rhetoric affects sentiment, as the weekend approaches expect this rhetoric to intensify.

Great roundup from Oanda & how markets can be affected by rhetoric (mostly empty) but which can gain traction so very quickly. All we can say about markets at present is that they are highly volatile & febrile and will continue to be so for the foreseeable future.